Dissilio Investments Pty Ltd v Nedbank Ltd

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: M Victor J
• Judgment Date: 05 May 2022
• Court: Gauteng Local Division, Johannesburg
• Docket Number: 434755/2019
• Citation: 2022 JDR 1750 (GJ)

Victor J:

Introduction:

[1]

At the heart of this matter lies the proper interpretation of a Loan Agreement together with two addenda. During the trial the Loan Agreement and the Addenda were referred to as Annexures A, B and C. Specifically, the proper interpretation of clause 2.2.3 in Addendum C to the Loan Agreement is central and reads as follows:

"This Agreement constitutes the whole agreement between the Parties as to the subject matter hereof and no agreement, representations or warranties between the parties other than those set out herein are binding on the Parties."

[2]

This action brings to the fore the more recent developments on the proper interpretation of contracts.

Parties:

[3]

The plaintiff in this matter is Dissilio Investments Pty Ltd, a private company which was formed at the instance of the defendant as a special purpose vehicle for transacting the loan finance it made available to the Plaintiff. The defendant is Nedbank Ltd, a duly incorporated and registered bank with its principle place of business at Sandown.

The facts:

[4]

On or about 15 October 2013 the defendant lent and advanced a bank loan to the plaintiff for the purpose of financing a retail centre development in Heidelberg, Gauteng, south of Johannesburg. The plaintiff held a 25 percent undivided share in the development project. The amount loaned was R122 800 000.00. The loan term was 75 months from date of registration of

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the mortgage bond or from date of the advance of the loan to the plaintiff and consisted of advances for a building period of 15 months and an amortisation period of 60 months being 75 months altogether.

[5]

The schedule to the signed Property Loan Agreement, Annexure A made provision for various charges which included a bank service fee of R2.8 million to be capitalised to the loan.

[6]

During August 2013 and also in September the parties duly represented on the part of the plaintiff by Mr Jaron Jacob Tobias and Mr Jacobus Marthinus Johannes Coetzer acting on behalf of the company to be formed and one Ms Brenda Sithole and Mr Mbuso Mashinini acting for the defendant, agreed to enter into a loan agreement for the development as described.

[7]

That agreement was formalised on or about 5 November 2013 with the plaintiff duly represented by the same parties and the bank also represented by its duly authorised employees and the purpose of the loan, as indicated, was for the development of a shopping mall complex known as the Heidelberg Shopping Mall.

[8]

The plaintiff participated in the development project to the extent of 25 percent; there were other parties in the project, including Flanagan and Gerhard who held a 50 percent share and another investor for the remaining 25 percent. The amount loaned by the defendant to the plaintiff in terms of the loan agreement was R122 800 000.00. The loan agreement Annexure A provided for the plaintiff to repay the loan early and the early repayment clause is found at 5.4 of the Agreement.

[9]

On 10 April 2014 the parties entered into a Fixed Rate Addendum referred to as Annexure B during the trial. Mr Tobias was reluctant to do so

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and the Addendum was signed under protest. Clause 5.3 of the Fixed rate addendum provided for breakage costs in the event that the loan is repaid early.

[10]

On 31 October 2017 the parties entered into a further Agreement titled "Addendum to the Loan Agreement and referred to as Annexure C. It is this Addendum to the Loan Agreement which forms the primary debate in this trial. The plaintiff contends that this Addendum C took the place of Agreements A and B in relation to the total amount owed by the plaintiff to the defendant. Mr Tobias understood it to be a new agreement.

[11]

A further important issue for determination is whether the amendments sought to be introduced by the plaintiff in its particulars of claim in relation to the repayment of the breakage fee of R1 107 556.78 which had been automatically and electronically debited by the defendant should be refunded. In addition, the amendment also introduced the apportionment of the service fee of R2.8 million. The defendant asserts that both these claims had prescribed by the time the amendment was sought to be introduced. The amendment was opposed and was heard before another Court prior to this trial. It was vigorously opposed but ultimately the plaintiff succeeded in introducing its further claims.

[12]

The plaintiff's case in relation to the service fee was that it was paid off well in advance of the 75 months anticipated in the property loan agreement Annexure A, and the defendant was therefore not entitled to levy the full service fee of 2.8 million and sought a pro rata reimbursement of R933 333.33.

[13]

The defendant admits various aspects of the agreement, but of course pleads that the introduced claims have prescribed and thus prescription remained a triable issue. In addition, in relation to Annexure C, the defendant contends that the addendum to the loan agreement did not take the place of the terms and the conditions of Annexure A being the loan agreement and Annexure B the fixed rate agreement. Its case is that save for the amounts amended in

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Annexure C the remaining clauses in A and B remained intact and operable. Therefore, according to the defendant, the breakage fee and the fixed rate agreement remained intact.

The proper interpretation of the Addendum to the Loan Agreement Annexure C:

[14]

Annexure C was an agreement drafted by the defendant. In its recordal the parties agree that there are two loans, loan 1 and loan 2 and for convenience they have account numbers ending in …20 and …21 be consolidated.

[15]

In terms of the recordal in Annexure C, the parties wished to consolidate loan 1 and loan 2 into one loan with a new account number 30165873. The loan balance for loan 1 was at the effective date, meaning 31 October 2017 R20 247 091.22.

[16]

The loan balance for loan 2 as at the same effective date was R83 517 229.53 which includes the breakage cost fee of 1 107 556.78. This breakage fee became payable when the fixed interest rate which was applied pursuant to the fixed rate addendum applicable to loan 2 dated 10 April 2014 was broken.

[17]

In clause 1.5 of C the following is stated:

"The parties have agreed to consolidate loan 1 and loan 2 on the terms and conditions contained in this addendum."

[18]

Clause 2.1.6 defines the loan agreement as follows:

"The loan agreement means a loan agreement entered into between the parties on 5 November 2013 as well as the schedule thereto entitled "Loan (to the property loan agreement" ) as amended from time to time and which was more specifically broken down into Loan 1 and Loan 2".

[19]

Clause 2.1.7 of Annexure C provides,

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"The loan balance is defined as meaning the loan amount outstanding and or capitalised and accrued interests fees, costs and other charges to which Nedbank is entitled in terms of the loan agreement and the 'Loan 1 loan balance' and the Loan 2 loan balance shall be construed accordingly."

[20]

The definition and interpretation clause, 2.2.1 provides as follows:

"In this addendum, unless clearly inconsistent with or otherwise indicated by the context terms as defined in the loan agreement shall bear a corresponding meaning in the addendum. The provisions of clause 1.2 of the loan agreement shall be deemed to be incorporated in this addendum."

[21]

In terms of Clause 2.2.3.

"The loan agreement constitutes the whole agreement between the parties as to the subject matter hereof and no agreement representations or warrantees between the parties other than those set out herein are binding on the parties."

[22]

The amendments to the loan agreement are clearly spelled out in clause 3.1. Loan 1 and loan 2 is described and it is then termed a new loan constituted under a new contract number 30 165 873. The new loan amount was R103 764 320.75 which was the aggregate of the loan 1 loan balance and loan 2 loan balance.

[23]

It was a short term loan; it would expire on 31 January 2018 or the date of transfer of the property to the new buyer of the Mall. The interest rates applicable to the new loan were defined as the prime rate and payable monthly in arrears. On the expiry date the loan would be repaid in full. The existing security would remain in place.

[24]

The contentious clause in Annexure C and on which the defendant relies provides as follows:

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Continuity

"The provision of loan agreement shall, save as amended in this agreement to be of full force and effect."

[25]

It is, as I have indicated, a strenuously contested issue between the parties. In my view, the continuity clause such as it is, must be read in the context and the purpose of Annexure C. The continuity clause does not save other payment obligations once it was signed by the parties.

[26]

The starting point is always to consider the plain, ordinary, grammatical meaning of the words in question. [1] However, the locus classicus on legal interpretation, Endumeni, explains that we must go further:

"Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more...